Business owners spend a great deal of time and money marketing to many, in the hope of attracting the few to their business. This process can be likened to a pipeline with a wide mouth narrowing as it goes along. The wide mouth represents the number of prospects you need to get interested in your product, so as to end up with enough conversions to hit your sales targets – the (much) narrower end of the pipeline. If the pipeline isn't constantly topped up with new prospects who are then moved through it to be converted into customers, sales become uneven, income is inconsistent, and running the business becomes crisis prone.

Classify and monitor prospects

The stages in a sales pipeline can be different from business-to-business, and particularly between B2B and B2C type businesses, but there are some essential similarities. In all businesses there is a need to generate inquiries. The technique may be through advertising, shopfront display, cold calling, word-of-mouth or networking.

In B2B the next steps might involve arranging an appointment with the prospect to establish their needs, making a sales presentation and quoting. In a retail situation the sales team is responsible for asking the right questions, treating the customer with care and selling the merits of the product. In both, the common aim is to achieve a sale.

The sales pipeline functions most effectively when there is a consistent process that leads prospects through these stages into becoming customers. The four step formal selling process is Qualify, Propose, Negotiate and Close. Following this path is a prerequisite to effective pipeline management. The second component is a system that tracks the progress of each prospect through the sales pipeline, so that you always know where every lead stands.

Sales pipeline analysis

The sales pipeline concept can be applied to assess how many prospects you need to reach and convert to hit your sales target. Do you need to generate 100 leads to get 10 quality prospects to sell to one customer? Then to double your customers you'll need 200 leads and turn them into 20 prospects to get two customers. Now you can make adjustments to your customer conversion process, testing various methods to turn 10 prospects into two or three customers instead of one.

Alternatively, you can use this information to identify at which stage you are losing prospects (where the pipeline is leaking). Once you can identify specific leakage points you can apply the appropriate plug.

Too many unqualified prospects wasting your time? Develop a screening process that will identify tire kickers, bargain hunters or poor credit risks, and remove them from the pipeline before wasting precious time on them. Losing prospects at the proposal stage? Maybe a selling script for your salespeople is needed, or training in how to establish rapport, understand the customer's real need and build the value of the product in the customer's eye.

For B2B businesses, knowing which stage each prospect is at shows how many sales to expect, (and hence how much income to expect), and when to expect them. This knowledge will affect business strategy. If the numbers are insufficient, then more decisive marketing action is required to lure more prospects into the pipeline. If numbers are very healthy, will demand outstrip capacity? Will you need to hire contractors, extra staff or upgrade equipment?

Maintaining the flow

The point of a sales pipeline is to encourage prospects to flow through to the sale. Use your system to keep track of which prospect is at which stage, and feed them information or assistance at the frequency, and using the channel they prefer, so as to move them to the next stage along. Don't miss out on opportunities by losing track of likely prospects and failing to follow up.

Michael McKerlie's background is in business and IT consulting. He has been heavily involved in the development and delivery of RAN ONE's world class solutions and training programs, as well as undertaking consulting assignments and directing the RAN ONE machine. As a speaker Michael has delivered presentations, training and speeches to over 20,000 people.